Bobby Turner, who runs a school-construction fund with tennis champion Andre Agassi, has started a new firm seeking to raise as much as $1 billion for charter schools, workforce housing and health-care facilities.
Turner Impact Capital, based in Santa Monica, California, plans to raise three initiatives of about $250 million to $350 million each, Turner said. They will be used to buy and redevelop facilities in urban areas with low-cost real estate and high demand for affordable housing, health and education services, said Turner, who in 2011 formed the $210.7 million charter-school fund with Agassi, now part of the new firm.
“It’s a battle-tested model,” Turner, who also raised $2 billion in real estate funds with retired basketball star Earvin “Magic” Johnson from 2000 to 2008, said in an interview at the Bloomberg News office in Los Angeles. “I’ve got a lot of experience in raising pioneering funds.”
The goal is to generate a profit for investors while serving a higher public purpose, said Turner, principal and chief executive officer of the new firm. Public-impact investing, which dedicates funds to issues such as education, community development, the environment and health care, has been increasing and is likely to climb further this year, according to JPMorgan Chase & Co. and the Global Impact Investing Network, which studied 125 companies that manage a total of $46 billion in such investments.
“At first this really was pioneering and unproven,” Agassi, 44, said in a telephone interview. “Now it’s proven. Across the board, everybody is starting to realize that there is an innovative private-sector solution.”
Turner declined to discuss expected returns or other specifics of the new funds, citing U.S. Securities and Exchange Commission restrictions on marketing investment vehicles.
Among the Turner-Agassi fund’s investors is the Ewing Marion Kauffman Foundation, which is focused on education and entrepreneurship and has about $2 billion under management. The Kansas City, Missouri-based foundation’s main reason for backing the fund was its “potential for future investment returns,” Chief Investment Officer Mary McLean said in an e-mail.
The JPMorgan survey, released May 2, showed that participants invested a total of $10.6 billion in impact funds in 2013.
The survey’s respondents “believe that the market continues to be challenged by a shortage of high-quality investment opportunities as well as a lack of appropriate capital across the risk/return spectrum,” JPMorgan and the Global Impact Investing Network said in their report.
The investors surveyed plan to allocate 19 percent more to such causes this year, with 54 percent of respondents targeting “competitive, market-rate returns,” according to the study.
“If you want to cure -- really cure -- a problem in society, you need to come up with a sustainable solution, and that means making money,” said Turner, who left Canyon Capital Realty Advisors LLC, where he was a partner for 20 years, in November to start the new firm. “Social-impact investing can generate better risk-adjusted returns than traditional opportunistic funds because of the following reason: we’re not trying to create demand.”
The Turner-Agassi Charter School Facilities Fund, which moved to Turner’s new firm after he left Canyon, finances the construction of charter schools, which have independent management and receive public-school funding based on attendance.
The fund, whose investors include the Pershing Square Foundation, co-founded by hedge-fund manager Bill Ackman, will have completed 39 schools for 17,500 students by around August. Plans call for the creation of 60 schools with 30,000 seats when all of the fund’s capital is deployed, Turner said. The fund has a nine-year lifespan.
“We’re pretty much doing what we expected -- and we had high expectations,” Agassi said.
Turner said he’s working to boost interest in social-impact financing among institutional investors. Much of the money for the Turner-Agassi fund came from university endowments and family foundations, he said.
“The biggest challenge is the ongoing education of capital,” he said.
Turner left Canyon last year after discussions to spin off the social-impact funds fell apart. Tripp Kyle, a representative for Canyon with Brunswick Group LLP, declined to comment.
Charter-school operators lease their buildings from the fund and have the option to buy them in three to five years. That allows them to get started with limited capital and then save money by becoming their own landlords later, Turner said.
His workforce-housing and health-care investments also will have exit strategies to allow his investors to recoup their money while the buildings continue operating and serving their communities, Turner said. Leveraging the equity with debt will almost triple the construction potential, he said.
“I’m a facilitator,” Turner said. “We want to build the infrastructure in the right place for the right community where there’s a proven demand.”